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Maxim Group analyst Jason McCarthy lowered his price target on Juno Therapeutics (NASDAQ: JUNO) to $34.00 (from $50.00) after the ROCKET study evaluating JCAR015 in no-option Adult ALL (Acute Lymphoblastic Leukemia) was placed on clinical hold for the second time. The firm maintained a Buy rating.

McCarthy highlighted:

The ROCKET study evaluating JCAR015 in no-option Adult ALL (Acute Lymphoblastic Leukemia) was placed on clinical hold for the second time. Two more patients died due to treatment-related neurotoxicity (cerebral edema), the same cause of death observed in July when ROCKET was place on hold the first time. The exact cause is not clear, but we know its multi-factorial (not just the conditioning regimen).

What happened in July vs what happened today? In July patient deaths were blamed on the use of Fludarabine ("Flu") in the conditioning regimen. Flu was removed and the trial went on. However, with patients still dying from cerebral edema, it suggests there are multiple factors, beyond conditioning that are having an impact. Is it the CAR construct, patient age, disease severity, disease type (leukemia vs lymphoma) CAR-T cell expansion and activity? Is the blood brain barrier playing a role? It is complex and we now know it is not just the Flu...Juno is working to find an answer.

Where does this leave Juno? Remember that adult ALL, while the lead program, is a niche population. Juno is also targeting lymphoma with JCAR014 and JCAR017, which is much larger and where Kite is leading the race with a potential approval coming in 2017...but Juno may not be too far behind. The opportunity in lymphoma is significantly greater with 10,000 patient deaths per year vs only 1,500 in leukemia.

Model Changes. JCAR015 in adult ALL is no longer factored in. Our model assumes JCAR017 is approved for NHL in 2019 and we assume a platform value. The removal of JCAR015 alone decreases our price target to $34, from $50.

Conclusion. In all, the challenge is in CAR-T, and it is not fair to just point to Juno, but also Kite and Novartis, remains finding the right balance between risk (side effects leading to death) and benefit (survival). Across the CAR-T space, there is a clear correlation between clinical benefit and the severity of side effects (cytokine release syndrome and neurotoxicity). Kite's ZUMA-1 study for example had >30% of patients experiencing neurotoxicity though none have died. The line between survival and death may be very thin but the reward is curing patients that will otherwise die. It may be more challenging to move to "less sick" patients, but we still believe CAR-T (and Juno) has a significant opportunity in the no-option population. We believe regulators see it this way as well.

For an analyst ratings summary and ratings history on Juno Therapeutics click here. For more ratings news on Juno Therapeutics click here.